"Efficiency and Cost Saving at Penn State"

During the 2006-07 academic year, topics for the Quality Advocates have focused on how Penn State is addressing several of the goals in the 2006-07 through 2008-09 strategic plan. On April 10, 2007, the Quality Advocates met to learn what Penn State has been doing in support of Goal 6, to “Develop new sources of non-tuition income and reduce costs through improved efficiencies.” Recent emphasis has also been placed on efficiency and effectiveness as a result of two articles in University Business and Campus Technology.1 The panelists at the meeting included: James Dunlop, recent Director of Procurement and Materials Management; Kevin Morooney, Vice Provost for Information Technology; and, Richard Pearce, Senior Director, Administrative and Financial Services for Auxiliary & Business Services. The session was moderated by Louise Sandmeyer, Executive Director, Office of Planning and Institutional Assessment. (See the presentation used in the discussion.)

Richard Pearce started off the session by pointing to Penn State’s long history of innovation and improvement. This was made apparent when Penn State compared its experiences with the revenue saving ideas found in the University Business article. In its initial review, the team conducting the comparison found that Penn State had already implemented many of the initiatives. The team is now conducting a survey to identify other revenue-saving or revenue-generating processes that Penn State has undertaken.

James Dunlop discussed the work of two groups which were formed to identify areas for improvement and cost reduction. The Expenditures and Operational Efficiency Team was formed to look for areas for significant improvement and cost reduction, which could be made while maintaining or enhancing the services of the University. As areas were identified, the team evaluated the improvements and implemented them. The team worked from 2000-2005 and identified many areas for improvement. The team worked cooperatively with the Cost Savings Task Force, which was formed in 2003. The Cost Savings Task Force was formed to evaluate 315 cost savings suggestions submitted by employees in response to a request from Rod Erickson, Executive Vice President and Provost, and Gary Schultz, Senior Vice President for Finance and Business/Treasurer. The task force analyzed the suggestions and identified 50 which were able to be implemented. Some of the main areas the suggestions focused on were becoming more efficient through the use of information technology, reducing the number of paper publications and other paperwork, and conserving energy.

Cost saving efforts and benchmarking practices are certainly not new to the University … A lot of the programs and practices at Penn State are leading edge and we get other people looking to Penn State for how we do things.

James Dunlop

In addition to these suggestions, the University has also conducted benchmarking with other universities to look for best practices. When the initial search failed to find much that Penn State was not already doing, the search was expanded to include business and government. The final analysis identified 122 cost savings ideas, but again Penn State was on the leading edge: it had already implemented 72 of the 122 strategies. The study also identified ten strategies of high potential, 16 which need further research, and 24 which were not feasible.

Best practices are measured by success in cost savings, creating efficiencies in operations, generating revenue growth, and providing increased customer and student satisfaction.

Richard Pearce

Consortia are another way Penn State decreases costs. Penn State helped form the Committee on Institutional Cooperation Purchasing Consortium and is also a member of the ENI Cooperative, a large consortium of almost 1400 colleges, universities and medical centers. Through these consortia, Penn State can save money through lower contract costs.

Across Penn State, there are a number of improvements and innovations that can be considered Best Practices. (A complete listing of the initiatives can be found here.) Pearce discussed a number of these including such initiatives:

eBill and eCheck – Electronic bills have replaced all paper bills for Penn State Bursar accounts and electronic payment from a personal checking account is now available. eBill has decreased the costs of printing, mailing and processing paper bills and eCheck makes it convenient and less costly for students to pay their bills and increases revenues to Penn State. Since Fall 2006, 58,000 eCheck payments have been made.

eBuy and E-Procurement – eBuy, Penn State’s E-Procurement initiative, has important benefits for all University departments because it takes advantage of Penn State’s negotiated contract pricing and enables online catalog ordering for departmental users through Penn State-designated catalogs. This results in improved operating efficiencies within Penn State departments, including Purchasing and Accounts Payable. Additional benefits include the aggregation and leveraging of University-wide volume for products and/or services to further reduce costs to University departments.

Perkins and University Loans E-Signature Promissory Notes – Penn State is the first institution to have students electronically sign their Perkins promissory notes. This eliminates the old 7-page document which students used to sign. Ninety-eight percent of participating students have signed electronically.

Reverse Auctions – Penn State now uses reverse auctions to make some of its purchases. The purpose of reverse auctions is to drive prices down by having “sellers compete to do business with Penn State” according to Pearce. Penn State has purchased such things as fleet vehicles and dorm furniture through this process and estimates a savings of $1.5 million on the 30 auctions held so far.

Student Laundry Energy Initiative – After pilot testing energy-efficient washers in the laundry in one residence hall and finding savings in both water and energy usage, the University has recently finished installation of about 600 new energy efficient washers in residence halls at University Park and the Commonwealth Campuses. The machines used less energy and water to operate, require less laundry detergent, and dispel more water from clothes than a regular washer resulting in less time to dry clothes. Water usage is expected to drop by half with the use of these new washers.

Kevin Morooney discussed some of the innovative ways Penn State is using information technology to improve the experiences of students, faculty and staff across the University. Through the use of technology, Penn State has made it easier for students to access material and each other, conduct their work, and create high quality projects. Some of the technologies include:

Podcast technology for access to classroom material

Software to allow collaboration for students at a distance from each other

3-D design and visualization in special facilities

Studio 204, a studio where students can create multimedia works

Wireless printing in labs planned for Fall 2007

Redesign of lab spaces for areas to allow collaboration

Faculty and staff have also benefited from innovative use of technology. Major initiatives include:

Adobe Connect videoconferencing software for one to many or many to many conferences

High performance computers to allow faculty to model simulations better

Preventive measures which detect potential intrusions and compromised computers, virus filters which block 30,000 viruses a week, and spam rejection software which rejects 4-7 million emails a day

Students are highly mobile but they are also nomadic … [We are] making students productive where they want to be productive.

Kevin Morooney

In addition, information technology has improved how people manage and find information by providing a knowledge base to ease the process of finding answers for computer problems, wikis to support collaboration, and faster access to services such as Napster and WebAssign through better management of passwords. Another significant process improvement is the VoIP telephone systems that have been installed across campuses.

Making change acceptable and getting people to use new initiatives and technology was a concern brought up by audience members. Dunlop pointed out that changes that improve or maintain the current level service are more acceptable to people since it makes their work easier. Dunlop gave examples of the transition to the purchasing card and eBuy as projects which initially had a lot of resistance, but once people saw the improvements, they were willing to use these services.

Sandmeyer mentioned that many times employees are afraid of change because they fear their jobs will be affected. Pearce mentioned that in many instances they have repurposed staff in order to save their jobs. For instance, employees who had previously been in purchasing as buying agents were reassigned to negotiating contracts. With the need for innovation in the workforce, Morooney pointed out that the national Council on Competitiveness had recently released a report which called for “a workforce which was willing to learn, unlearn and relearn”. According to Morooney, employees should understand that their “job isn’t X, your job is adaptability”. Sandmeyer added that “when we look at people we hire, we shouldn’t hire them for their current ability, we should hire them for the ability to learn and grow.” Having employees who understand the need for innovation and improvement will help ease transitions.

The Quality Advocates Network meets several times each semester to share ideas and examples of improvement and change. To join the Quality Advocates Network mailing list or to learn more about the meetings scheduled, contact the staff at psupia@psu.edu.

The Quality Advocates Network is open to all Penn State faculty, staff, administrators, and students.